Weibo's IPO: Rough sailing ahead?

FORTUNE — It’s impossible to know whether a company’s stock will rise or crash after an IPO. Too many variables and emotions influence the spectacle. But you can take a general pulse of things, and for the upcoming IPO of China’s Twitter-like microblog Weibo, it’s not very encouraging.

Formerly Sina Weibo, now just Weibo, the company said it plans to soon list on the tech-friendly Nasdaq exchange, use the ticker WB, and raise $500 million. It’s the latest Chinese tech company taking advantage of America’s red-hot IPO market. Weibo’s parent, Sina (SINA), an Internet portal in China, is spinning off Weibo while the market is receptive. The far larger Alibaba Group, with businesses similar to Amazon, will likely soon IPO in New York at a valuation above $100 billion; another online retailer, JD.com, is expected to list later this year.

What should have investors worried about Weibo are the shifting winds in China. The Twitter-type of microblogging that Weibo provides (weibo itself translates into microblog) is becoming less popular. In fact, the number of total users dropped 9% to 281 million in 2013. For Weibo’s part, it says its monthly user base grew to 129 million at the end of 2013, from 97 million in 2012. But new preferences have been made, and Weibo is no longer the go-to social network. That crown belongs to Tencent’s WeChat.

Unlike Weibo, WeChat is a closed social network, similar to Facebook (FB). When you want to share a picture with your friends, and only your friends, you use WeChat. A Chinese friend told me that he exchanged messages about today’s Wall Street Journalstory about corruption via WeChat, not Weibo, because Weibo was already censoring the story. Another friend said she quit Weibo last year; she only wants to use WeChat.

WeChat is a formidable challenger to Weibo. Its monthly user base measures 300 million, and a WeChat payments system keeps users logging into their app to pay phone bills and buy movie tickets. Users naturally migrated to WeChat, an online area where the government’s censors couldn’t so easily reach, after the government started cracking down on criticism and dissident on Weibo.

For IPO investors, Weibo’s finances are no small matter. Weibo continues to hemorrhage money, posting annual losses of $38 million in 2013, $102 million in 2012, and $118 million in 2011. Losses are one thing when a company is fighting for market share in a rapidly growing industry. But when the pie shrinks, reality sets in. That’s where Weibo finds itself at the dawn of an IPO.

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